One streak you didn’t notice suggests there’s room to run

By Shawn Langlois

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August wasn’t supposed to play out like this. July had some hiccups, largely due to some geopolitical black swans. This month isn’t historically a time of healing either, so you’d have been forgiven for trimming exposure before heading to the beach.

But if you did, boy, have you missed out. We’re having the best August on the S&P since 2000, with a gain of almost 4%. We all remember what happened in the months that followed starting in September 2000, when that 6.1% rally in August turned into a 46% plunge through January 2001.

As it stands, we’re clearly in some cozy state of suspended animation. It’s only been a few days, but this 2,000 level is feeling pretty sticky.

“Those that own are comfortable owning, and those that are afraid of the risks continue staying away,” said Jani Ziedins, the man behind the Cracked Market blog. “When no one changes their mind, we don’t have waves of buying or selling that drive market moves and is why we are pausing.”

Lost in the S&P’s steady diet of uninspired highs is the fact that the PowerShares 100 Trust
/quotes/zigman/105934/delayed/quotes/zigman/105934/lastsaleQQQ — an ETF based on the Nasdaq-100 — is doing something it’s only ever done three other times. The basket of big techs is on a 10-session winning streak. The longest was just last year at 14.

Must be ready for a letdown, right? Not if the prior trends tell us anything, according to Ryan Detrick. Check out just how strong the index remained in the aftermath of the prior streaks. Those are some gaudy numbers.

“So today if you see a talking head on TV or social media say the QQQ has gone two weeks without being red and this is bearish, you can know that the quantified data simply doesn’t back that up,” Detrick said.

The quote of the day:“The questions aren’t rhetorical, and the answers aren’t obvious. To know what we’re getting into, we need information that keeps up with the constantly shifting realities across the most dangerous areas of Syria and Iraq. We need people like James Foley, and now that he’s gone his value seems incalculable.” — George Packer, in an article for The New Yorker.

The economy:The second estimate of the second-quarter GDP is the highlight this morning, but there’s more than that. Initial weekly unemployment claims and pending home sales are both on tap. Then around lunchtime the Kansas City Fed manufacturing survey hits. While we’re on the topic, here’s a cool GDP per capita factoid: If the U.K. were part of the United States, it would be the second-poorest state, beating out Mississippi but behind Alabama.

The chart of the day:Scott Redler tweeted this macro view of the technical side of the recent rally. After the “go-go days” of the 90s and the “Roaring 80s”, the index spent the “lost decade” digesting the advance. Now, with the double-top being taken out, the chart is supposedly telling us the next target is way up at 2,300.

The call of the day: Beware the behemoth stocks, warns David Merkel of the Aleph blog, for they are not as safe as you might think. “The behemoths may be safer than many other stocks in the market, and are priced at a discount to the market averages, but your absolute margin of safety is lower,” he wrote. Merkel defines behemoths as companies trading on U.S. exchanges with market caps over $100 billion. There are 61 right now, and that’s 22 more than there were three years ago. “The main problem with behemoths is that they are undermanaged,” he said. “There is only so much a single senior management team can do; the incentives of management teams get rather dull with respect to each division.” Read what he has to say about Berkshire Hathaway
/quotes/zigman/219651/delayedBRK.A and the rest of them.

A massive swell is rocking the coast this week, especially in Malibu, where one surfer died. Here’s Laird Hamilton shooting the pier on a standup paddle-board.

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Need to Know (NTK) guides investors to the most important, insightful items required to chart a course ahead of each trading day. Anchored by lead writer Shawn Langlois, NTK will sift through the fire hose of news, commentary and data, from traditional and non-traditional sources, and extract what’s most essential. You can start reading NTK here as it begins publishing at approximately 6:30 a.m. ET, or sign up here to get a version in your email box every morning at approximately 8:45. a.m. ET.